Monetary policy had contributed to the containment of CPIX inflation to within the target range against the background of various risks to the inflation outlook, said South African Reserve Bank (SARB) Governor Tito Mboweni on Wednesday during his address at the 86th ordinary general meeting of shareholders of the bank.
“Today, I am pleased to report on another successful year in the 85-year history of the bank,” said Mboweni.
“The achievement and maintenance of price stability remains the primary objective of the bank. Indeed, the most significant accomplishment of the bank has been the containment of inflation within the target range since September 2003. This does not imply that the other functions of the bank are neglected. On the contrary, these remain crucial in the operations of the bank,” he added.
Mboweni said that the Monetary Policy Committee (MPC) would remain vigilant and would not hesitate to adjust the monetary policy stance when necessary and that the bank was committed to the pursuit of low and stable inflation as a major contributing factor to the growth and development of South Africa.
“We live in an ever-changing global environment, an environment that is characterised by opportunities and hope, but also fraught with risks. In this environment the South African Reserve Bank must implement its mandate and manage the associated risks to ensure that South Africans benefit from opportunities emanating from a changing world,” said Mboweni.
Mboweni reiterated that future monetary policy decisions would depend on changes in the outlook for inflation and economic developments.
“The sustained strong domestic demand, combined with threats posed by international oil prices, food prices, and exchange rate developments, increased the risk to the inflation outlook. In response to these heightened risks and the deteriorating inflation outlook, the MPC felt that pre-emptive action was required. Accordingly, the repo rate was increased by 50 basis points to 7,5% on 8 June 2006 and by a further 50 basis points on 3 August 2006,” said Mboweni.
“However, future monetary policy decisions will depend on changes in the outlook for inflation and economic developments,” he concluded. ‒ I-Net Bridge